Be Kind, Rewind: Here’s Why the Browning-Ferris Joint Employment Standard Is Going to Be Reversed

AF6DB19D-A636-4AB4-BFA8-7D592D57137FRemember when you used to go to the video store to rent VHS tapes and there was that little sticker on the tape cheerfully reminding you to “Be kind! Rewind!”  I know, half of you have no idea what I am talking about, but there used to be these things for watching movies before Netflix — no, not DVDs, before that — no, no, not cave drawings, after that.

Anyway, take my word for it. The point was, when you were done with your movie, you were supposed to rewind the tape so the next viewer could start over, back at the beginning of the film. It was the courteous thing to do.

With last week’s confirmation of Peter Robb as the new General Counsel of the NLRB, the pieces are now in place for a rewind of the 2015 Browning-Ferris joint employment decision, which made it much easier under federal labor law to find joint employment. The 2015 decision changed the standard so that indirect and tangential control was sufficient to establish a joint employment relationship, rather than the previous standard requiring a more direct exercise of control.

The changed standard was a product of two factors: (1) a majority-Democratic, pro-union NLRB, and (2) a Democratic, pro-union NLRB General Counsel. A few weeks ago, the NLRB was reconstituted to bring back a Republican majority. Last week, a new General Counsel was confirmed. To overstate how this works, the General Counsel decides which cases to bring to the Board. The Board then decides those cases.

With these two recent developments, it’s almost time to Be Kind (to Businesses) and Rewind, back to the pre-2015 joint employment standard.

It will take some time, but it now seems almost inevitable that at some point during the next couple of years, the right case will be brought to the Board (courtesy of Mr. Robb), and the new Republican-majority Board will vacate the 2015 standard and return to the requirement that direct control must be shown before a business can be deemed a joint employer under federal labor law.

It’s too early right now for businesses to disregard Browning-Ferris. For now, it’s still the law, and Administrative Law Judges are likely to follow it (although that too may change, with the Browning-Ferris decision currently on appeal).

Anyway, stay tuned for further developments. And meanwhile, please fix the blinking green “12:00” on the face of your VCR.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Here’s a Tip a Cartoon Cat Would Love: Try This Edit to Your Independent Contractor Agreements

Independent contractor misclassification cat“Whenever he gets in a fix, he reaches into his bag of tricks!” Yes, boys and girls, I am talking about Felix the Cat, whose magical bag of tricks could be transformed to get him out of any treacherous situation. Don’t you wish you had one of those?

Well, I won’t share mine, but I can offer this tip, which may help you avoid a treacherous situation.

This weekend I was reading a California decision on independent contractor misclassification. (I do other, more fun things in my free time too, so don’t make fun. Ok, you should make fun a little.) While analyzing Right to Control factors, the court ruled that the worst fact for the business was that it could terminate the contractor at will. The ability to terminate a relationship at will, the court ruled, was the “ultimate” form of control! Really? I agree it’s a factor among many, but the “ultimate factor”? Come on.

Anyway, this problem is easily avoided with some creativity. Allow me to reach into my bag of tricks.

If your relationship with a contractor is for an indefinite time period and you rely on work orders to describe each project, consider a one-year term instead. No, not a one-year term with auto-renewals unless the parties give notice. That’s too close to an indefinite term. Allow the one year term to expire. But…

Add a provision that, after the one-year term expires, if you offer a new work order and if the contractor accepts a new work order, then acceptance of that new work order constitutes an agreement to renew the independent contractor agreement for another year.

This variation on the auto-renewal approach requires the parties to take an affirmative act to renew the agreement — the offer and acceptance of a new work order. And this approach also allows you to maintain that the relationship with the contractor is project-by-project (one work order at a time).

The main agreement does not have to be terminable at will. No need for that. If each project is defined by a work order and you’re not satisfied, then don’t offer any new work orders. The agreement itself does not have to be terminated.

If your independent contractor’s tasks are not defined by work orders, then this solution might not work for you. But if your contractor picks up work one work order at a time, this can be a helpful little maneuver.

No guarantees here, but I like this approach better than the indefinite agreement. Contracts of indefinite duration are definitely a negative factor in the Independent Contractor vs. Employee analysis, even though most courts would not be as fixated on that fact as this particular court was.

Now I am going to turn my bag of tricks into a helicopter.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Are Prostitutes Employees or Independent Contractors?

D019E4C0-7B51-4597-BA1A-0C84C01105CF.jpegThere’s a headline I never expected to write. But apparently this is an issue in the Great State of Nevada.

I subscribe to a service that alerts me when new lawsuits are filed involving independent contractor misclassification disputes. This gem arrived in my inbox last week:

Sierra National Corp. dba The Love Ranch is suing the Nevada unemployment department. Apparently the State ruled that the Love Ranch’s lovely ladies were employees, not independent contractors. The Ranchers filed a lawsuit asking the State to open its files and show how it reached that conclusion. Here’s the description of the case:

Mandamus and public records. Petitioner, which operates a legal brothel, seeks to compel respondent to provide public records relating to respondent’s investigation and decision that the brothel’s prostitutes are employees, not independent contractors. Respondent agency’s blanket denial of the petitioner’s public-records request violates the state public records law.

I’d love to be a fly on the wall listening to that dispute. I imagine it went something like this:

State: Your prostitutes are employees, not independent contractors.

Love Ranch: Why?

State: Well, you know, the Right to Control Test.

Love Ranch: Seriously?! We do NOT tell them how to… Never mind.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Don’t Wear Pajamas to Work: Be Careful Using “Statutory Minimum” Workers Comp Clauses in Subcontractor Agreements

Pajamas - Independent Contractor Agreements and Workers Compensation ClausesHave you ever had the dream where you show up at work or school in your pajamas or underwear? You’re exposed and embarrassed in the dream, and you can’t figure out why you forgot to put on regular clothes, right? (Please don’t tell me I’m the only one who’s had this dream. Please?)

You may be living this dream inadvertently in your vendor or subcontractor agreements. (And this is not what people mean when they say, “I’m living the dream!”)

Here’s the problem:

It’s commonplace in vendor and subcontractor agreements to include a section requiring insurance. You might require $1 million in commercial liability coverage, for example. Insurance clauses usually (and should) require the vendor or subcontractor to carry workers’ compensation coverage too. But sometimes these clauses are written in a way that may leave you exposed. Here’s an example:

“Subcontractor agrees to provide workers’ compensation coverage to its workers in the minimum amount required by law.”

You’re good, right? Depends on the state — and the circumstances.

The “minimum amount required by law” may be none.

First, if the worker retained by your vendor or subcontractor is its independent contractor (and not its employee), then there is probably no coverage required at all. State laws impose standards for determining Independent Contractor vs. Employee, but usually there is no requirement to provide any coverage to a true independent contractor.

Second, even if the worker is your vendor’s employee, the “minimum amount required by law” in the state might be none:

In Texas, for example, workers’ compensation coverage is generally optional. The minimum amount required by law is none.

Several states do not require employers to carry coverage unless they have a minimum number of employees. According to this chart from the National Federation of Independent Businesses (NFIB), an advocacy organization for small businesses, the following states require employers to provide workers’ compensation coverage only if they have at least this number of employees:

VA – required if 2 or more
GA, NC, WI – required if 3 or more
RI, SC – required if 4 or more
MS, MO – required if 5 or more

Some states have different requirements for construction and non-construction businesses:

NM – construction: required if 1 or more; non-construction: required if 3 or more
FL – construction: required if 1 or more; non-construction: required if 4 or more
TN – construction: required if 1 or more; non-construction: required if 5 or more

In some states, such as Ohio and New York, workers’ compensation might not be required for sole proprietors who have no employees other than themselves.

So what does all this mean for your agreements?

1. Depending on how your contract is written, you might be wearing pajamas to work. In other words, your agreement might leave you exposed, inadvertently, since the minimum amount of required workers’ compensation coverage for your vendor or subcontractor’s employees might be “none.”

2. Please don’t rely on the thresholds I have listed above. I have not examined the workers’ compensation laws state-by-state and I am merely listing state law summaries from the web. I have not checked these for accuracy. Check the laws in your state and check with legal counsel.

The point here is that the state-minimum required amount of coverage might be “none.” Things can go south for your business in a hurry if your vendor or subcontractor has insufficient coverage. If one of their workers is severely injured, the worker may bring a lawsuit against your business as an alleged joint employer. If the injury is severe enough and there is no workers’ compensation coverage, liability could be in the millions.

Keep this risk in mind when drafting the insurance sections of your vendor and subcontractor agreements. Draft carefully, and be sure you are fully covered.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Time to Dance? Momentum Builds for Proposed New Joint Employment Law

Screen Shot 2017-10-28 at 11.47.09 AM

Leadership Lessons from Dancing Guy is a low-quality youtube video that has somehow amassed more than a million hits. In the video, a lone (possibly intoxicated) festival goer starts dancing in a field. After a minute or so, momentum builds and others join him, showing off their terrible dance moves in a video you’ll wish you hadn’t wasted three minutes watching. (Just speaking from experience here.)

Several weeks ago, the House began considering a bill that would rewrite the definition of “joint employment” under federal wage and hour law (Fair Labor Standards Act) and federal labor law (National Labor Relations Act). The Save Local Business Act would require “direct” and “significant” control over “essential terms” of employment before a business could be considered a joint employer of a worker employed by another business (such as a staffing agency or a subcontractor). Read more here and here.

Originally sponsored by Rep. Bradley Byrne of Alabama (you might think of Rep. Byrne as the original dancer in the Leadership video, but dressed as a conservative Southern gentleman), the bill now has 112 co-sponsors, including a few Democrats. Dance party!

The bill continues to gain momentum. On October 4, in celebration of  International Toot Your Flute Day, a House committee voted to advance the bill to a vote by the full House.

The business community has been active and vocal in supporting its passage. On October 26 (National Mincemeat Day!), as part of a coordinated effort by the International Franchise Association, franchise owners from 19 states sent letters to Congressional leaders urging passage of the Act. Other coordinated campaigns in support of the Act have been organized by the U.S. Chamber of Commerce, Retail Industry Leaders Association (RILA), National Waste and Recycling Association, and other pro-business groups.

On October 27, the Congressional Budget Office issued its report on the Act, finding that the Act would not affect direct spending, revenues, or the federal budget.

Chances of passage in the House appear strong, but no floor vote is scheduled. Businesses should follow the status of this bill, which may have profound effects on federal interpretation of the joint employment doctrine.

If the bill passes, businesses might join Mike Myers in celebration, proclaiming “Now is the time on Sprockets when we dance!

[Update 11/8/17:  The House of Representatives approved the bill yesterday by a vote of  242-181, with 8 Democrats voting yes. Passage in the Senate, however, will be far more difficult.]

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Court Rules That Shadowing Dad at Work Might Require Payment

Shadow - Trainee or Employee  death-2577486_1280In the 1930s, the popular radio program The Shadow featured an invisible avenger who possessed “the mysterious power to cloud men’s minds, so they could not see him.” (He supposedly picked up this power in East Asia, which must have seemed mysterious in an era before Kung Pao Chicken was widely available.)

Eighty years later, “shadowing” has a different meaning. An unpaid trainee follows around a more experienced employee as a way to learn the business. Few trainees have mastered the power of invisibility [Note: only the best ones have, and they’re hard to find … ba-dum-bum], and often the nature of being a trainee involves getting in the way of the real work.

Scott Axel was a trainee who shadowed his father at an automobile wholesaler in Florida. He had no expectation of pay, and the business said it would not hire him. As a favor to his dad, the business let him learn the business by shadowing his dad.

Returning the favor, Scott then sued the wholesaler, claiming it failed to pay him minimum wage.

Dumb claim, right? Loser! (The claim, I mean, ahem.)

Anyway, a federal court of appeals was not so sure and ruled that it was a close call whether he was an employee or an unpaid trainee. Scott, apparently, had the mysterious power to cloud judges’ minds.

For much of the time, Scott just did work that his dad was doing, under his dad’s supervision. If that was all he did, though, the case probably would have been tossed out.

The company’s mistake was allowing Scott to do some wholesaling work that his father did not do, which arguably displaced a worker who would have performed the work if it were not for our hero. Scott posted vehicles on eBay and Craigslist, working under the direction of others, and he received a disciplinary warning for spending too much money on the listings. Scott testified that he spent more time on these tasks than on shadowing his dad.

The Appeals Court evaluated the case using a test for whether an unpaid trainee should be paid. The test is meant for educational internships and did not neatly fit the circumstances, so the court admittedly struggled with the analysis.

Ultimately, the Court decided it needed more information about how much time Scott spent performing the various tasks. The case was sent back to the lower court.

The lesson here for businesses who allow shadowing is to remember what a shadow is.  A shadow follows someone around.  A shadow does not do independent, productive work. (Except here.)

While there were several factors in this case that supported Scott being an unpaid trainee, too much gray area remained.

So what happens next?  The lower court might allow further briefing or might send the case to trial. Did the business do anything wrong? The ultimate question brings to mind the introduction from the radio program of long ago: “Who knows what evil lurks in the hearts of men? The Shadow knows!

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Would You Like Some Pepperoni with Your (Oops) Joint Employment?

Joint employment pizza 31E83EC5-E554-428A-A5D6-37F13905C3B9According to pizza.com, “There are approximately 61,269 pizzerias in the United States.” That number seems pretty precise to me, not an approximation, but who am I to question something I read on the internet?

Approximately 4 of the 61,269 pizzerias are owned by a New Yorker named Paola P., who runs each of the 4 under a different LLC. Paola’s employees can be assigned to any of the 4 pizzerias on their workdays. Seems boring so far, but stay with me. Now say this three times fast:

Paola’s practice prompted problems since Paola P’s pizzerias were impermissibly positioning personnel to prevent paying overtime. 

Pity.

Workers were being assigned to work roughly 50 hours a week, but they would work at two or three locations, less than 40 hours at each site. They received paychecks from the various LLCs (remember, each pizzeria was run as a separate company), which by itself is ok, but Paola’s mistake was that she failed to aggregate the hours from the 4 locations and failed to pay overtime when any individual exceeded 40 hours of total work.

Because the pizzerias shared ownership, management, and commingled employees, the workers were considered joint employees of the four companies. For those keeping score at home, that’s what we call “horizontal joint employment.”

Paola’s companies were liable for failure to pay overtime to each worker in any week when an employee worked more than 40 hours in the aggregate, even if no worker reached 40 hours at any individual location.

A federal court determined that the violation was flagrant and imposed the three-year statute of limitations, instead of the ordinary two-year statute.

This was a $360,000 mistake, half of which was for liquidated (double) damages.

According to our friends at Guinness, the world’s most expensive pizza can be ordered for $2,700 at Industry Kitchen in New York. This magical pie contains stilton (it’s a cheese, I had to look it up too), foie gras, caviar, truffle, and 24K gold leaves. Paola could have ordered 133 of these and still had some money left for dessert.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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